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Table of Contents
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List of Forms by Chapter - Chapter 1 — Overview of Revocable Grantor Trusts
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I. Introduction - II. Advantages of Revocable Grantor Trust During Grantor’s Lifetime
- In the Event of Disability
- [1.10] Guardianship Avoidance
- [1.11] Continuity of Management
- Facility of Asset Management
- [1.12] Coordination and Unification of Asset Management
- [1.13] Ease of Modification
- Flexibility To Meet Changing Circumstances
- [1.14] Choice of Fiduciary
- [1.15] Choice of Law of Trust
- [1.16] Transfer of Administration of Trust
- Estate Planning Implementation
- [1.17] Gift-Giving Program
- [1.18] Income Tax Deductibility of Legal Fees
- [1.19] Attorney Malpractice — Limitations
- [1.20] Creditors’ Claims
- [1.21] Preservation of Nature of Assets
- [1.22] Lifetime Tax Considerations
- III. Disadvantages of Revocable Grantor Trust During Grantor’s Lifetime
- IV. Advantages of Revocable Grantor Trust upon Grantor’s Death
- Minimization of Probate
- [1.28] In General
- [1.29] Privacy
- [1.30] Avoidance of Ancillary Probate
- [1.31] Reduction of Legal Fees
- [1.32] Minimization of Court Expenses
- [1.33] Expeditious Distribution of Assets
- [1.34] Annual Accounting and Objections by Beneficiaries
- [1.35] Flexibility in Planning for Heirs
- Estate Settlement Impact
- [1.36] Defeating Spousal Elective Rights
- [1.37] Circumvention of Charitable Gift Laws
- Challenges to the Testamentary Plan
- [1.38] Penalty Clauses
- [1.39] Reduced Risk of Contest
- [1.40] Equitable Proceeding
- [1.41] Distribution of Insurance and Retirement Benefits
- [1.42] Income Tax Flexibility
- V. Disadvantages of Revocable Grantor Trust upon Grantor’s Death
- VI. Conclusion
- Chapter 2 — Determination of the Taxable Estate
- I. Introduction
- II. Federal Estate Tax
- Determining the Gross Estate
- [2.3] In General
- [2.4] Valuation and Alternate Valuation
- [2.5] Real Estate
- [2.6] Special Valuation of Farmland
- [2.7] Land Contract Receivables
- [2.8] Transfers with a Retained Life Estate
- [2.9] Jointly Owned Property Between Spouses
- [2.10] All Other Joint Interests
- [2.11] Tenancies in Common
- [2.12] Stocks and Bonds
- [2.13] Closely Held Corporate Stock
- [2.14] Mortgages, Notes, Cash, Checks, Contracts, and Partnerships
- [2.15] Interest and Dividends
- Life Insurance
- [2.16] Inclusion of Life Insurance
- [2.17] Group Life Insurance
- [2.18] Personal Property
- [2.19] Transfers During the Decedent’s Life
- [2.20] Powers of Appointment
- [2.21] UTMA or Custodial Accounts
- [2.22] Pensions, IRAs, and Annuities
- [2.23] Miscellaneous
- Determining the Taxable Estate
- [2.24] In General
- [2.25] Deductible Costs and Expenses
- [2.26] The Marital Deduction
- [2.27] Charitable Gifts
- [2.28] Rates and Estimating the Tax
- [2.29] Basis of Assets
- III. Illinois Estate Tax
- Chapter 3 — Planning for Spouses and Descendants
- I. In General
- II. Marital Deduction Portion of the Estate
- [3.3] In General
- [3.4] Outright Distribution to Spouse
- Life Estate with General Power of Appointment
- [3.5] In General
- [3.6] Qualifying for Marital Deduction
- [3.7] Income Provision
- [3.8] Invasion of Principal
- [3.9] Power of Appointment
- [3.10] Frequency of Use
- QTIP Trust
- [3.11] In General
- [3.12] Qualifying for QTIP Marital Deduction
- [3.13] Tax Election
- [3.14] Income Provision
- [3.15] Invasion of Principal
- [3.16] Payment of Taxes
- [3.17] Reduction of Principal
- [3.18] Distribution upon Death of Spouse
- [3.19] Estate Trust
- [3.20] Questions for the Planner
- III. Nonmarital Portion of the Estate
- [3.21] In General
- [3.22] Allocation of Property or Distribution with Disclaimer
- Trust for Spouse and Descendants
- [3.23] In General
- [3.24] Trust for Spouse — Payment of All Income
- [3.25] Sprinkling-of-Income Provision
- [3.26] Accumulation of Income
- [3.27] Distribution of Principal
- Spouse’s Remarriage
- [3.28] In General
- [3.29] Conversion of Mandatory Payment of Income to Discretionary Sprinkling Provision
- [3.30] Removal of Spouse from Sprinkling Trust
- [3.31] Limited Distribution of Principal
- [3.32] Trust for Children of Prior Marriage
- [3.33] Distribution of Nonmarital Trust
- [3.34] Questions for the Planner
- IV. Distribution upon Death
- [3.35] In General
- [3.36] Separate Trusts for Each Child
- [3.37] Common Trust Fund Until the Youngest Child Is a Certain Age or Graduates from College
- [3.38] Distribution and Distribution Ages for Children
- [3.39] Lifetime Trust for Children
- Trusts for Support of a Minor or Person with a Disability
- [3.40] In General
- [3.41] Additional Source Material
- [3.42] Form for Discretionary Trust Provision
- [3.43] Disaster Provisions
- [3.44] Questions for the Planner
- V. Tangible Personal Property and the Residence
- VI. Choice and Powers of Trustee
- [3.53] Grantor as Trustee
- [3.54] Individual vs. Corporate Trustees
- Family Members vs. Independent Persons
- [3.55] In General
- Power To Distribute Principal
- [3.56] In General
- [3.57] Power To Use Principal or Income To Discharge Legal Obligation To Support
- [3.58] Power To Distribute Principal When Trustee Is Income Beneficiary
- [3.59] Power To Sprinkle Income Among Beneficiaries, Including Trustee
- [3.60] Power of Beneficiary To Remove and Appoint Trustee
- [3.61] Nontax Concerns
- [3.62] Questions for the Planner
- Chapter 4 — Drafting Marital Deduction and Credit Shelter Provisions
- Chapter 5 — Tax Aspects of Trust Administration
- I. [5.1] Overview
- II. Pre-Death Aspects
- [5.2] Gift Tax
- [5.3] Generation-Skipping Transfer Tax
- Federal Income Tax
- [5.4] Grantor Considered as Owner
- [5.5] Tax Return and Tax Year
- [5.6] Trust Taxpayer Identification Number
- [5.7] Estimated Tax Payments
- [5.8] Basis and Holding Period
- [5.9] Passive Activity
- [5.10] At-Risk Rules
- [5.11] S Corporations
- [5.12] Section 1244 Stock
- [5.13] Installment Sales
- [5.14] Sale of Principal Residence
- Illinois Taxes
- [5.15] Illinois Income Tax
- [5.16] Illinois Residential Property Tax Credit
- III. Post-Death Aspects
- [5.17] Generation-Skipping Transfer Tax
- Federal Estate Tax
- [5.18] Inclusion of Trust Assets
- [5.19] Deductibility of Administrative Expenses
- [5.20] Trustee’s and Executor’s Liability for Payment of Estate Tax
- [5.21] Gifts from Grantor Trust Within Three Years of Death
- [5.22] Disclaimers
- Federal Income Tax
- Taxation of Net Income of Grantor Trusts After the Trust Becomes Irrevocable
- [5.23] In General
- [5.24] Distributable Net Income
- [5.25] Simple or Complex Trust
- [5.26] Sprinkling Provision
- [5.27] Throwback Rules
- [5.28] Fiscal Year-End
- [5.29] Taxpayer Identification Number
- [5.30] Estimated Tax Payments
- [5.31] Basis and Holding Period
- [5.32] Gain and Loss to Trust upon Distribution of Property
- [5.33] The Taxpayer’s Final IRS Form 1040
- [5.34] Passive Activity Losses
- [5.35] S Corporation Stock
- [5.36] Illinois Income Tax
- Tax Apportionment and Tax Clauses
- [5.37] In General
- [5.38] Estate Tax Apportionment Clauses
- [5.39] Generation-Skipping Transfer Tax
- [5.40] Tax on Excess Accumulation from Qualified Retirement Plans
- [5.41] Income Taxation of Retirement Plan Benefits Paid to a Revocable Grantor Trust
- Chapter 6 — Planning for Incapacity
- I. Overview
- II. Ways To Provide for Incapacity
- III. Effect of Incapacity on Trust Management
- IV. Coordination with Durable Power of Attorney
- [6.14] In General
- Uses of Durable Power of Attorney in Conjunction with Revocable Grantor Trust
- [6.15] Funding a Trust
- [6.16] Creating or Amending a Trust
- [6.17] Distributing Gifts
- [6.18] Medical Care and Other Personal Decisions
- [6.19] Comparison of Durable Power of Attorney, Probate, Guardianship, and Living Trust
- V. Appendix
- Chapter 7 — Spousal Elective Rights
- Chapter 8 — Funding the Revocable Grantor Trust
- I. [8.1] Overview
- II. Funding Through the Use of Conveyancing Instruments
- III. Funding Through Designation of the Trust as Beneficiary
- IV. Certificate of Trust Existence and Authority
- V. [8.17] Testate Transfer
- VI. Appendix — Sample Forms
- [8.18] Deed in Trust
- [8.19] Land Contract Assignment (Unmarried Person)
- [8.20] Land Contract Assignment (Married Person)
- [8.21] Mortgage Assignment
- [8.22] Stock Assignment
- [8.23] Bond Assignment
- [8.24] Partnership Assignment
- [8.25] Personal Property Assignment (Nonspecific)
- [8.26] Personal Property Assignment (Specific)
- [8.27] General Assignment
- [8.28] Certificate of Trust Existence and Authority
- Chapter 9 — Standard Revocable Grantor Trust Agreement
- I. [9.1] In General
- II. Standard Revocable Grantor Trust Agreement with Comments
- [9.2] Heading and Identification Data
- [9.3] Declaration of Trust
- [9.4] Article 1: Name of Trustee
- [9.5] Article 2: Name of Trust and Date of Creation
- [9.6] Article 3: Funding of Trust
- [9.7] Article 4: Distribution During Lifetime
- [9.8] Article 5: Terms After Death
- [9.9] Paragraph 5.1: Debts and Taxes
- [9.10] Paragraph 5.2: Tangible Personal Property
- [9.11] Paragraph 5.3: Names of Children and Spouse; Adopted Children as Descendants
- [9.12] Paragraph 5.4: Division of Trust upon Grantor’s Death
- [9.13] Article 6: Special Terms of Both Marital Trust and Credit Shelter Trust
- [9.14] Paragraph 6.1: All Income to Spouse
- [9.15] Paragraph 6.2: Invasion of Principal for Spouse
- [9.16] Paragraph 6.3: Special Power
- [9.17] Article 7: Special Terms of Marital Trust
- [9.18] Article 8: Disposition of Credit Shelter Trust
- [9.19] Article 9: Perpetuities Clause
- [9.20] Article 10: Trust Administration
- [9.21] Paragraph 10.1: Resignation of Trustee
- [9.22] Paragraph 10.2: Successor Trustees
- [9.23] Paragraph 10.3: Removal and Replacement of Trustee
- [9.24] Paragraph 10.4: No Bond Required of Trustee; Good Faith
- [9.25] Paragraph 10.5: Annual Reports
- [9.26] Paragraph 10.6: Acts of Prior Trustees
- [9.27] Paragraph 10.7: Diversity of Holdings
- [9.28] Paragraph 10.8: Income Tax
- [9.29] Paragraph 10.9: Small Trust Termination
- [9.30] Paragraph 10.10: Spendthrift Provision
- [9.31] Paragraph 10.11: Exercise of Power by Will
- [9.32] Paragraph 10.12: Spouse’s Power To Require That Marital Trust Property Be Made Productive
- [9.33] Paragraph 10.13: Sale of Land to Family Member
- [9.34] Paragraph 10.14: Federal or Illinois QTIP Election
- [9.35] Paragraph 10.15: In Terrorem Clause
- [9.36] Paragraph 10.16: S Corporation Stock
- [9.37] Article 11: Trustee Powers
- [9.38] Paragraph 11.1: Allocation of Principal and Income
- [9.39] Paragraph 11.2: Retention of Property
- [9.40] Paragraph 11.3: Investments
- [9.41] Paragraph 11.4: Distributions — Facility of Payment
- [9.42] Paragraph 11.5: Stocks and Securities
- [9.43] Paragraph 11.6: Creation of Corporation, Limited Liability Company, Land Trust, or Partnership
- [9.44] Paragraph 11.7: Retention of Grantor’s Business Interest
- [9.45] Paragraph 11.8: Voting Trusts and Buy-Sell Agreements
- [9.46] Paragraph 11.9: Real Estate
- [9.47] Paragraph 11.10: Bidding at Sale of Property
- [9.48] Paragraph 11.11: Mineral Leasing
- [9.49] Paragraph 11.12: Oil and Gas Business
- [9.50] Paragraph 11.13: Farm Management
- [9.51] Paragraph 11.14: Farm Manager
- [9.52] Paragraph 11.15: Preservation of Farmland or Investment in Common Stocks or Mutual Funds
- [9.53] Paragraph 11.16: Buildings
- [9.54] Paragraph 11.17: Insurance
- [9.55] Paragraph 11.18: Depreciation and Depletion
- [9.56] Paragraph 11.19: Residence for Beneficiaries
- [9.57] Paragraph 11.20: Borrowing Money and Mortgaging Property
- [9.58] Paragraph 11.21: Litigation
- [9.59] Paragraph 11.22: Additions to Trust
- [9.60] Paragraph 11.23: Employment of Agents and Counsel; Fees and Expenses
- [9.61] Paragraph 11.24: Division of Trust Property
- [9.62] Paragraph 11.25: Distribution of Undivided Interests
- [9.63] Paragraph 11.26: Continuation of Powers; Disclaimer
- [9.64] Paragraph 11.27: Dealing with Fiduciaries
- [9.65] Paragraph 11.28: Payment of Taxes, Etc.
- [9.66] Paragraph 11.29: Special Valuation
- [9.67] Paragraph 11.30: Generation-Skipping Transfer Tax
- [9.68] Paragraph 11.31: Division into Separate Trusts
- [9.69] Paragraph 11.32: Commingling Trusts
- [9.70] Paragraph 11.33: Combined Record-Keeping
- [9.71] Paragraph 11.34: Trust as Beneficiary of Insurance
- [9.72] Paragraph 11.35: Change of Situs of Trust
- [9.73] Paragraph 11.36: Certificate of Trust Existence
- [9.74] Paragraph 11.37: Continuance of Trusts with §2032A Property
- [9.75] Paragraph 11.38: Broad Power
- [9.76] Article 12: Order of Death
- [9.77] Article 13: Amendment, Revocation, or Termination
- [9.78] Article 14: Language on Deeds
- [9.79] Article 15: Dealing with Third Persons
- [9.80] Article 16: Construction
- [9.81] Signature and Acknowledgment
- [9.82] Acceptance by Trustee
- III. [9.83] Concluding Comments
- IV. [9.84] Revocable Grantor Trust Agreement
- Chapter 10 — S Corporations and Illinois Revocable Grantor Trusts
- Chapter 11 — Trusts by Citizens or Residents for Noncitizen Spouses (Qualified Domestic Trusts)
- I. [11.1] Introduction
- II. QDOT Requirements
- III. [11.10] Reformation and Amendment of Trust
- IV. [11.11] Multiple QDOTs
- V. [11.12] Transfer/Assignment of Property to QDOT
- VI. [11.13] QDOT Termination
- VII. Federal Taxation of the QDOT
- [11.14] In General
- [11.15] QDOT Tax
- [11.16] Exemptions
- [11.17] Basic Exclusion Amount Planning
- [11.18] Tax Return and Due Date
- [11.19] Liability and Lien for Tax Due
- [11.20] Basis in Property Distributed
- [11.21] Special Rule When Spouse Becomes Citizen
- [11.22] Double Taxation Treaties
- [11.23] Provision for Payment of QDOT Taxes
- [11.24] Capital Gains Recognition Under Code §684
Authors
- Adam S. Garber
Adam S. Garber
Adam S. Garber is a Partner at Levenfeld Pearlstein, LLC, in Chicago, where he focuses his practice on estate planning. He was named an Illinois Super Lawyer Rising Star in 2017, is a member of the Trust Law Committee of the Chicago Bar Association, and is a Certified Public Accountant. Mr. Garber received his B.S. with honors from the University of Illinois, his J.D. with honors from Chicago-Kent College of Law, and his LL.M. in Taxation with honors from Northwestern University School of Law.
Revocable Grantor Trusts (ARCHIVED 2019 EDITION)
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